During our recent survey, we noticed that most informal retailers were no longer accepting the $2 bond note. In fact, as far back as last week, a growing number of people had already started expressing their preference of $5 bond notes over the $2 note but today was different. Almost everyone was not taking the note and when we got to the local OK supermarket there was a long winding queue and almost everyone had a bag full of the green notes.
You can blame the $20 note for this
It has become a familiar story. As soon as a higher denomination note comes out the market roundly rejects the smallest note. We saw this with the 25c coins,the 50 cent coin and the $1 and $2 coins. While a lot of people were caught off-guard the first few times it happened this time around a lot of people were sort of expecting this to happen.
The Reserve Bank has meanwhile still insist that the note is legal tender and ought to be accepted:
We want to make it clear that $2 notes are still legal tender. Perhaps we need to issue a press statement to that effect. But we will be substituting those bond notes with new notes but it is a gradual process.The RBZ Governor speaking to the Herald
Past experience shows such assertions count for little in practice. Whenever the market rejects a note or a coin, it dies no amount of backing from the central bank can save it. As we have already said above, we have seen this before. There is a practical reason why the market is able to successfully reject these notes, due to inflation you need a small bundle to buy bread and a sackful to buy groceries.
Then there is the fact once the market rejects a note it can no longer sell at a premium. In other words, such a note will now be on par with RTGS balances in people’s accounts and mobile wallets. That is the kiss of death itself. Who wants to carry bag fulls of money when they can use electronic currency?